Wintermute, a prominent crypto market maker, has projected that the newly introduced spot Ether exchange-traded funds (ETFs) could attract annual flows ranging from $4.8 billion to $6.4 billion. This influx could potentially lead to a price increase in Ether between 17.9% and 23.87%.

After several weeks of revisions to registration statements, the U.S. Securities and Exchange Commission (SEC) has approved multiple spot Ether ETFs. This approval marks a significant milestone for the crypto market in the U.S.

The SEC has sanctioned Ether ETF registration forms from several major players, including 21Shares, Bitwise, BlackRock, Fidelity, Franklin Templeton, VanEck, and Invesco Galaxy. Forms for the Grayscale Ethereum Trust and the Grayscale Ethereum Mini Trust have also been activated.

Lower Demand for ETH ETFs Compared to BTC ETFs

Wintermute highlights that the new spot Bitcoin ETFs amassed $13.8 billion within the first 100 days of trading earlier this year.

“Our analysis suggests that Ether ETFs will likely see lower-than-expected demand, closer to $3.2 billion to $4 billion. This is due to the lack of a staking mechanism, which reduces Ethereum's appeal as an ETF investment, and the absence of a unified narrative to attract investors,” stated Wintermute in a research note shared with CryptoNews.

The journey towards Ether ETF approval has involved numerous regulatory changes and milestones. Analysts are optimistic about the launch, predicting substantial inflows into these ETFs, though exact numbers remain speculative.

SEC’s Ban on Staking in ETH ETFs

A critical aspect of the SEC’s approval is the prohibition of staking within these ETFs, as noted by Wintermute.

Ethereum's transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism with Ethereum 2.0 has significantly increased its energy efficiency. Staking has become a vital part of the Ethereum ecosystem, offering direct investors a steady stream of income from staking rewards, including newly minted ETH and transaction fees.

Wintermute points out that staking also enhances the stability and security of the Ethereum network, indirectly boosting investor confidence.

However, the SEC’s decision to exclude staking from Ethereum ETFs arises from regulatory concerns. The SEC contends that staking could be considered an unregistered securities offering, consistent with their broader enforcement actions against platforms like Coinbase and Kraken.

In conclusion, Wintermute notes, “We believe these ETFs will likely experience lower-than-anticipated demand, primarily due to reduced interest from institutional investors compared to Bitcoin ETFs.”

The lack of a staking mechanism diminishes Ethereum’s attractiveness as an ETF investment. While there are various potential narratives issuers can leverage, there is a noticeable absence of a unified story to galvanize investor interest, the market maker added.